HLIB Research Summary - 19 Nov 2014

TM Berhad (HOLD çè)

DTTB Deal

• TM announced the agreement with MYTV Broadcasting SB for the provision of Digital Terrestrial Television (DTT) infrastructure, network facilities and related services.
• The pack is for a period of 15 years with an annual contract value of RM70.5m.
• A much anticipated positive development as TM continues to monetize its widely distributed fibre backhaul network.
• Besides that, this one-stop solution covers 50 transmission sites as well as data warehousing located in Cyberjaya data centre.
• Reiterate HOLD after raising our DDM-derived fair value by 13.6% from RM6.05 to RM6.87 as we roll forward our valuation to FY16.

Matrix (BUY çè)

• BSS: Hijayu 1B completed, launched Hijayu 3A (phase 3) with take up rate of over 30% and will be launching phase 4 in 4QFY14.
• STV: Land sales target of RM100m is likely to be surpassed should the deal for 55acres of land is succeeded. FY15 land sales target remained at RM100m.
• STP: Developed on the newly acquired land of 164 acres. 80 acres have been carved out for an automobile investor currently in negotiation.
• TSI: Launched Impiana Height (phase 1) with GDV of RM63.5m and take up of 37.8%.
• FY15: Remained positive despite challenging outlook ahead given its advantage of low land costs and upcoming launched are skewed more to mid- to high-end property developments.
• We maintain our TP at RM3.74 (20% discount to RNAV), which implies FY15E P/E of 7.2x. Maintain BUY.

CIMB Group (TRADING BUY çè)

CIMB Niaga – From Hero To Zero

• 3QFY14 results below HLIB and consensus expectations mainly due to sharp rise in Niaga NPLs and provision.
• Besides Niaga, IB also suffered from lower volume and deal flows.  Ex Niaga, 9MFY14 profit grew 6% yoy.
• 4QFY14 – Singapore strong growth but corporate banking and Indonesia still under pressure.  Others will be stable.
• Indonesia asset quality May deteriorate further but it expect to bottom out by 4Q14/1Q15.  Recent fuel price hike not expected to have significant impact. 
• Deal pipeline in 1H15 better.
• FY14 forecast cut by 13% while FY15-16 lowered by 2-3%.
• Target price lowered to RM6.91 based on Gordon Growth with ROE of 12.4% and WACC of 10.1%.  
• Despite concerns about merger dilution and duplication as well as uncertainties in Indonesia , we believe the selldown to 1.4x FY14 P/B has been over exaggerated.  Maintain TRADING BUY as values emerged amid uncertainties. 

Lafarge (HOLD çè)

Well below Expectations

• 9MFY14 net profit of RM206.1m (-19.5%) accounted for 57.9% and 52.5% of our and consensus full-year forecasts.
• Declared 3^rd interim single-tier DPS of 8 sen. YTD, Lafarge has declared NDPS of 26 sen.
• YoY. Intense competition, lower cement sales volume, higher electricity tariff as well as the removal of fuel subsidy have resulted in 3QFY14 net profit declining by 54.4% to RM54.8m.
• QoQ. 3QFY14 revenue decreased by 7.3% mainly due to lower selling prices and lower volumes due to the impact of the festive season. In line with lower revenue and higher operating costs arising from the fuel subsidy removal, net profit declined by 29.1%.
• Maintain TP of RM9.74. (based on unchanged 19.5x, in line with the regional forward P/E for cement stocks and 2015 EPS of 49.9 sen) Maintain HOLD for now. We will review our forecast pending the analyst briefing on 21 November. 

Hartalega (HOLD çè)

1H15 Results In Line

• 1H15 core net profit of RM107m (-23% yoy) came in within our expectations but below consensus.
• Declared 1^st interim dividend of 3.0 sen per share (1HFY14: 3.5 sen).
• 2Q15 revenue weakened (-2% yoy) despite volume growth, indicating ASP decline.
• EBITDA margin fell (5.8ppt yoy) due to high NGC start-up costs and higher electricity and natural gas cost.
• Hartalega views that the incoming NGC capacity (first two lines set to commission by 4QCY14) will be able to sustain earnings and mitigate concern of lower ASP.
• Although there is an 11.3% upside to our TP, we remain conservative and maintain our HOLD call due to the declining ASP trend and competitive environment.
• Reiterate HOLD with unchanged TP of RM7.34, pegged to an unchanged multiple of 16.2x of CY16 EPS, based on 1SD above 5-year historical average P/E.

Sunway (BUY é)

9MFY14 Results Above Expectations

• 9MFY14 core PATAMI came above expectations due to wider-than-expected margins from property development.
• 9MFY14 revenue of RM3.4bn showed a growth of 5% yoy mainly coming from the stronger sales in property development, construction, quarry and healthcare segments.
• No material updates on SunCon to date, apart from the recent announcement on the changes in numbers of shares offered in the proposed listing of SunCon following the exercise of warrants and ESOS (ratio of 1 SunCon for every 10 Sunway shares remained unchanged).
• We tweaked our margins higher hence FY14-15 is up by 7.1-7.2%. Post earnings revision, our TP is upgraded to RM3.65 from RM3.55, based on SOP valuation. We upgraded our recommendation to BUY as we remain optimistic with the group, especially with its proposed listing of SunCon as it would further enhance shareholders’ value.

TSH Resources (HOLD çè)

Within expectations

• 9MFY14 core net profit of RM111.9m (+29.8%) accounted for 79.8-80.5% of consensus and our full-year forecasts. we consider the results within expectations as we anticipate CPO prices to remain low.
• Maintain earnings forecasts, TP of RM2.09, as well as our HOLD recommendation on the stock.  

MRCB (BUY çè)

3Q results: Staging a comeback  

• 9M core earnings at RM56m vs loss of RM111m in previous year, surpasses our expectations.
• Secures RM141m resort job in Desaru, vying for incinerator job in Kepong.
• Property sees contribution from 9 Seputeh and PJ Sentral.
• Maintain BUY (TP: RM1.91), turnaround signs are insight.

MBM (BUY çè)

In Line – Expect Strong 4Q14

• Reported 3Q14 core earnings of RM25.3m and 9M14 of RM80.3m, in-line with HLIB’s forecast (73.3%) and consensus (68.3%).
• Weak result in 3Q14, due to lower group sales volume (stopped production of Viva in 3Q14, prior to new launch Axia in Sep) and lower TIP (affecting components manufacturing).
• Expect strong earnings in 4Q14, mainly due to maiden deliveries of highly demanded Perodua Axia, increasing production of OMI Alloy wheel and increasing TIP (especially Perodua and Proton).
• Maintained BUY with unchanged Target Price of RM4.00, based on SOP.

Tambun Indah (HOLD çè)

9MFY14 Results Within Expectations

• TILB’s 9MFY14 reported PATAMI of RM76.3m came in within expectations.
• Declared first single tier interim dividend of 3 sen/share.
• 3Q14 revenue grew 20.3% yoy driven by increased progress billings, higher take-up rates as well as introduction of new development projects.
• Gross margin in 3QFY14 improved by 7.7-ppts, returning to its usual >30%.
• TP remained unchanged at RM2.14 (based on unchanged 10% discount to RNAV). Maintain HOLD.

Traders Brief

Relief rally will spur KLCI to retest 1836-1850 resistance zones

• Technically, the strong rebound yesterday had injected some positive momentum to the market, supported by expectations of traditional year-end end Nov/Dec window dressing activities and bottom-up technical oscillators. Further upside targets are 1823 (38.2% FR) and 1836 (23.6% FR). Stiff resistance is situated at 1850 (downtrend line and 200- SMA).
• Short term supports are 1812 (50% FR) and 1800
• Today’s recommendation (FIG5): Trading BUY on PENTA.          

Trading Idea - PENTA

PENTA-Poised to surpass 52-wk high

• Valuation wise, at RM0.41, PENTA is trading at 0.91x P/B, about 68% lower against its peers’ average P/B of 2.8x. As a result, we believe laggard equipment manufacturer like PENTA is likely play catch up against its peers, given improving fundamentals.
• Technically, a decisive breakout above RM0.44 will spur prices to retest RM0.47-0.485 zones. In the wake of a positive breakout above the key support-turned-resistance at RM0.40, and supported by the Tweezer bottoms formation and improving technical oscillators coupled with the higher lows, PENTA is likely to advance further to a cluster of immediate resistances at RM0.42 (10-d SMA) to RM0.44 (50% FR). A decisive breakout above RM0.44 will spur prices higher towards RM0.47-0.485 levels. Key supports are RM0.385-0.40. Cut loss at RM0.37